Pin Bar Forex Strategy Chart Patterns

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Pin Bar Forex Trading Strategy – Pin Bar Definition

An Introduction To The Pin Bar Forex Trading Strategy and How to Trade It Effectively…

The pin bar formation is a price action reversal pattern that shows that a certain level or price point in the market was rejected. Once familiarized with the pin bar formation, it is apparent from looking at any price chart just how profitable this pattern can be. Let’s go over exactly what a pin bar formation is and how you can take advantage of the pin bar strategy in the context of varying market conditions.

What is a Pin Bar?

The actual pin bar itself is a bar with a long upper or lower “tail”, “wick” or “shadow” and a much smaller “body” or “real body”, you can find pin bars on any stripped-down, “naked” bar chart or candlestick chart. We use candlestick charts because they show the price action the clearest and are the most popular charts amongst professional traders. Many traders prefer the candlestick version over standard bar charts because it is generally regarded as a better visual representation of price action.

Characteristics of the Pin Bar Formation

• The pin bar should have a long upper or lower tail…the tail is also sometimes called the “wick” or the “shadow”…they all mean the same thing. It’s the “pointy” part of the pin bar that literally looks like a “tail” and that shows rejection or false break of a level.

• The area between the open and close of the pin bar is called the “body” or “real body”. It is typically colored white or another light color when the close was higher than the open and black or another dark color when the close was lower than the open.

• The open and close of the pin bar should be very close together or equal (same price), the closer the better.

• The open and close of the pin bar are near one end of the bar, the closer to the end the better.

• The shadow or tail of the pin bar sticks out (protrudes) from the surrounding price bars, the longer the tail of the pin bar the better.

• A general “rule of thumb” is that you want to see the pin bar tail be two/thirds the total pin bar length or more and the rest of the pin bar should be one/third the total pin bar length or less.

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• The end opposite the tail is sometimes referred to as the “nose”

Bullish Reversal Pin Bar Formation

In a bullish pin bar reversal setup, the pin bar’s tail points down because it shows rejection of lower prices or a level of support. This setup very often leads to a rise in price.

Bearish Reversal Pin Bar Formation

In a bearish pin bar reversal setup, the pin bar’s tail points up because it shows rejection of higher prices or a level of resistance. This setup very often leads to a drop in price.

How to Trade a Pin Bar Formation

The pin bar formation is a reversal setup, and we have a few different entry possibilities for it:

“At market entry” – This means you place a “market” order which gets filled immediately after you place it, at the best “market price”. A bullish pin would get a “buy market” order and a bearish pin a “sell market” order.

“On stop entry” – This means you place a stop entry at the level you want to enter the market. The market needs to move up into your buy stop or down into your sell stop to trigger it. It’s important to note that a sell stop order must be under the current market price, including the spread, and a buy stop order must be above the current market price, including the spread. If you need more help on these “jargon” words checkout my free beginners forex course for more.

On a bullish pin bar formation, we will typically buy on a break of the high of the pin bar and set our stop loss 1 pip below the low of the tail of the pin bar. On a bearish pin bar formation, we will typically sell on a break of the low of the pin bar and place a stop loss 1 pip above the tail of the pin bar. There are other stop loss placements for my various setups taught in my advanced price action course.

“Limit entry” – This entry must be placed above the current market price for a sell and below the current market price for a buy. The basic idea is that some pin bars will retrace to around 50% of the tail, so we can look to enter there with a limit order. This provides a tight stop loss with our stop loss just above or below the pin bar high or low and a large potential risk reward on the trade as a result.

To effectively trade the pin bar formation you need to first make sure it is well-defined, (see pin bar characteristics listed at the top of this tutorial). Not all pin bar formations are created equal; it pays to only take the pin bar formations that meet the above characteristics.

Next, try to only take take pin bars that are displaying confluence with another factor. Generally, pin bars taken with the dominant daily chart trend are the most accurate. However, there are many profitable pin bars that often occur in range-bound markets or at major market turning points as well. Examples of “factors of confluence” include but are not limited to: strong support and resistance levels, Fibonacci 50% retracement levels, or moving averages.

How to trade pin bars from key chart levels

Trading Pin Bar Signals with Support and Resistance Confirmation, is perhaps one of the most effective ways to trade forex, if not thee most effective way to trade. Below, we will show some examples of trading pin bars from key levels. Follow along closely because this is likely to be one of the most powerful Forex trading strategies you will ever learn.

Pin bars are one of the most valuable tools that price action traders have in their Forex trading arsenal. They often form at major market turning points, correction levels, or within a trend as continuation signals. When combined with a strong support or resistance level, pin bars can be one of the most accurate trading signals available. The best pin bar setups occur near confluent levels of previous price action as the market moves in one direction and then regresses back to re-test a previous support or resistance level. We can see in this daily chart of EUR/USD two successive pin bars testing a previous support and resistance level and then resuming downward movement

Pin bars occur in all market conditions; up trends, down trends, and range bound. The beauty of price action analysis is that it teaches you how to analyze market movement based on inherently generated data; namely price data. Reversal bars taken at confluent levels can act as a map to long-term profits in the forex market. Trader’s can design a highly profitable trading method entirely around pin bars if they so desire. The more confluence added to a pin bar formation the more accurate it becomes. We can see in this daily chart of GBP/USD below a beautiful pin far formed at a previous support/resistance level with the up trend and also at a Fibonacci 50% retrace level. The more confluence you can combine with a pin bar signal the higher its accuracy becomes.

Pin bars are adaptable to ever-changing forex market conditions and can be very profitable even in ranging markets. They can be very accurate if the formation is clear and obvious and combined with solid support or resistance confirmation. We can see in the daily chart of EUR/JPY below two very well formed counter-trend pin bars that formed off support in a range bound market that netted some serious gains for traders with a keen eye for price action analysis. Pin bars of this clarity and magnitude can be entered after the close on a market order.

Pin bars can be taken at major market turning points counter-trend if they are very well formed. Often times long-term trend changes are set off by large pin bars that can result in some serious gains for traders aware of the potential. The daily GBP/JPY chart below demonstrates how a large, well formed pin bar can tip off traders to longer-term changes in trend direction. Often times trend changes will occur rapidly and form what is called a “V” bottom with the bottom bar being a pin bar.

When pin bars form at the top or bottom of a consolidating market that is taking a breather after a large directional movement they can often signal trend resumption is near. In the daily chart of USD/CAD below we can see multiple pin bars formed at the top of a range bound market that was most recently in a large down trend. The last pin bar on the right side of the chart set off a very powerful move that resulted in a breakout of the range and subsequent downward trend resumption.

pin bar reversals are a great price action tool that forex traders can use in all market conditions. They are best played at confluent levels with strong support and resistance confirmation. Pin bars taken with the dominant daily trend are generally more accurate than counter trend pins. However, counter trend pins can set off long-term directional bias changes that can mean serious cash for traders with a trained eye. Pin bars work great at the tops and bottoms of range-bound markets and provide very accurate setups in these conditions.

Examples of the Pin Bar Formation in Action

Here is a daily chart of CAD/JPY, we can see numerous pin bar formations that were very well defined and worked out very nicely. Note how all the pin bar’s tails clearly protruded from the surrounding price action, showing a defined “rejection” of lower prices. All of the pin bars below have something in common that we just discussed, can you guess what it is?

If you said that all the pin bars in the above chart are “bullish pin bar setups”, then you answered the question right. Good job!

In the following daily USD/JPY chart we can see an ideal pin bar formation that resulted in a serious move and trend reversal. Sometimes pin bars like this form at significant market turning points and change the trend very quickly, like we see below. The example in the chart below is also sometimes called a “V bottom reversal”, because the reversal is so sharp it literally looks a V…

Here is an example of a trending market that formed numerous profitable pin bar setups. The following daily chart of GBP/JPY shows that pin bars taken with the dominant trend can be very accurate. Note the two pin bars on the far left of the chart that marked the start of the uptrend and then as the trend progressed we had numerous high-probability opportunities to buy into it from the bullish pin bars shown below that were in-line with the uptrend.

Pin bar in range-bound market and at important market turning point (trend change):

In the chart example below, we can see a bearish pin bar sell signal that formed at a key level of resistance in the EURUSD. This was a good pin bar because it’s tail was clearly protruding up through the key resistance and from the surrounding price action, indicating that a strong rejection as well as false-break of an important resistance had taken place. Thus, there was a high probability of a move lower after that pin bar. Note the 50% limit sell entry that presented itself as the next bar retraced to about 50% of the pin bar’s length before the market fell significantly lower…

Pin bar in-line with trend with multiple factors of confluence:

In the chart example below, we are looking at a bearish pin bar sell signal that formed in the context of a down-trending market and from a confluent area in the market. The confluence between the 8 / 21 dynamic EMA resistance layer, the horizontal resistance at 1.3200 and the downtrend, gave a lot of “weight” to the pin bar signal. When we get a well-defined pin bar like this, that has formed at a confluent area or level in the market like this, it’s a very high-probability setup…

Other names you might find pin bars described by:

There are several different names used in ‘classic’ Japanese candlestick patterns that refer to what are basically all pin bars, the terminology is just a little different. The following all qualify as pin bars and can be traded as I’ve described above:

• A bearish reversal or top reversal pin bar formation can be called a “long wicked inverted hammer”, “long wicked doji”, “long wicked gravestone”, or “shooting star”.

• A bullish reversal or bottom reversal pin bar formation can be called a “long wicked hammer”, “long wicked doji”, or “long wicked dragonfly”.

In Summary

The pin bar formation is a very valuable tool in your arsenal of Forex price action trading strategies. The best pin bar strategies occur with a confluence of signals such as support and resistance levels, dominant trend confirmation, or other ‘confirming’ factors. Look for well formed pin bar setups that meet all the characteristics listed in this tutorial and don’t take any that you don’t feel particularly confident about.

Pin bars work on all time frames but are especially powerful on the 1 hour, 4hour and daily chart time frames. It is possible to make consistent profits by only trading the pin bar formation, and you can learn more about it in my price action trading course. Upon adding this powerful setup as one of your main Forex trading strategies, you will wonder how you ever traded without it.

Pin Bar Trading Strategy

The Pin Bar Pattern (Reversal or Continuation)

A pin bar pattern consists of one price bar, typically a candlestick price bar, which represents a sharp reversal and rejection of price. The pin bar reversal as it is sometimes called, is defined by a long tail, the tail is also referred to as a “shadow” or “wick”. The area between the open and close of the pin bar is called its “real body”, and pin bars generally have small real bodies in comparison to their long tails.

The tail of the pin bar shows the area of price that was rejected, and the implication is that price will continue to move opposite to the direction the tail points. Thus, a bearish pin bar signal is one that has a long upper tail, showing rejection of higher prices with the implication that price will fall in the near-term. A bullish pin bar signal has a long lower tail, showing rejection of lower prices with the implication that price will rise in the near-term.

How to Trade with Pin Bars

When trading pin bars, there are a few different entry options for traders. The first, and perhaps most popular, is entering the pin bar trade “at market”. That simply means you enter the trade at the current market price.

Note: the pin bar pattern must be closed out before entering the market based on it. Until the bar is closed as a pin bar pattern, it’s not really a pin bar yet.

Another entry option for a pin bar trading signal, is entering on a 50% retrace of the pin bar. In other words, you would wait for price to retrace to about the halfway point of the entire pin bar’s range from high to low, or its “50% level”, where you would have already placed a limit entry order.

A trader can also enter a pin bar signal by using an “on-stop” entry, placed just below the low or above the high of the pin bar.

Here’s an example of what the various pin bar entry options might look like:

Trading Pin Bar Signals in a Trending Market

Trading with the trend is arguably the best way to trade any market. A pin bar entry signal, in a trending market, can offer a very high-probability entry and a good risk to reward scenario.

In the example below, we can see a bullish pin bar signal that formed in the context of an up-trending market. This type of pin bar shows rejection of lower prices (note the long lower tail), so it’s called a “bullish pin bar” since the implication of the rejection reflected in the pin bar is that the bulls will resume pushing price higher…

Trading Pin Bars against the Trend, From Key Chart Levels

When trading a pin bar counter to, or against a dominant trend, it’s widely accepted that a trader should do so from a key chart level of support or resistance. The key level adds extra ‘weight’ to the pin bar pattern, just as it does with counter-trend inside bar patterns. Any time you see a point in the market where price initiated a significant move either up or down, that is a key level to watch for pin bar reversals.

Pin bar Combo Patterns

Pin bars can also be traded in combination with other price action patterns. In the chart below, we can see an inside pin bar combo pattern. This is a pattern in which the inside bar is also a pin bar pattern. These inside pin bar signals work best in trending markets like we see below…

The pattern in the chart below could be considered the ‘opposite’ of the inside-pin bar, it’s an inside bar inside a pin bar signal. It’s relatively common to see an inside bar form within the range of a pin bar pattern. Often, a large breakout move will follow an inside bar formed within a pin bar’s range, for this reason, the pin bar + inside bar combo setup is a very potent price action trading pattern, as we can see in the chart below…

Double Pin Bar Patterns

It is not uncommon to see back-to-back or “double pin bar patterns” from at key levels in the market. These patterns are traded just like a normal pin bar, except they provide a trader with a little more ‘confirmation’ since they reflect two consecutive rejections of a level…

Pin Bar Trading Tips

  • As a beginning trader, it’s easiest to learn how to trade pin bars in-line with the dominant daily chart trend, or ‘in-line with the trend’. Counter-trend pin bars are a bit trickier and take more time and experience to become proficient at.
  • Pin bars basically show a reversal in the market, so they are a very good tool for predicting the near-term, and sometimes long-term, direction of price. They often mark major tops or bottoms (turning points) in a market.
  • Not every pin bar is going to be one worth trading. The best ones occur in strong trends after a retrace to support or resistance within the trend, or from a key chart level of support or resistance.
  • As a beginner, keep your eyes peeled for daily chart time frame pin bars as well as 4 hour chart time frame pin bars, as they seem to be the most accurate and profitable.
  • Longer tails on a pin bar indicate a more significant reversal and rejection of price. Thus, long-tailed pin bars tend to be a little higher-probability than their shorter-tailed counter-parts. Long-tailed pin bars also tend to see price retrace to near the pin bar’s 50% level more often than shorter-tailed pins, this means they are typically better candidates for the 50% retrace entry discussed previously.
  • Pin bars will show up in any market. Be sure you practice identifying and trading them on a demo account before trading them with real money. Practice makes perfect.

I hope you’ve enjoyed this pin bar pattern tutorial. For more information on trading pin bars and other price action patterns, click here.

10 Price Action Bar Patterns You Must Know

Bar patterns are nifty short-term patterns that are useful for timing trades and finding logical stop-loss points. No price action trader can do without learning about bar patterns.

So these are 10 bar patterns that you must know.

Reversal Bar Patterns

Volatility Bar Patterns

1. Reversal Bar Pattern

What does it look like?

A bullish reversal bar pattern goes below the low of the previous bar before closing higher.

A bearish reversal bar pattern goes above the high of the last bar before closing lower.

What does it mean?

For the bullish pattern, the market found support below the low of the previous bar. Not only that, the support was strong enough to push the bar to close higher than the previous bar. This is the first sign of a possible bullish reversal.

For the bearish pattern, the market met resistance above the high of the previous bar. Furthermore, the resistance was powerful enough to cause the current bar to close lower.

How do we trade it?

  1. Buy above the bullish reversal bar in an uptrend
  2. Sell below the bearish reversal bar in a downtrend

2. Key Reversal Bar

What does it look like?

A key reversal bar is a particular instance of a reversal bar that shows clearer signs of a reversal.

A bullish key reversal bar opens below the low of the previous bar and closes above its high.

A bearish key reversal bar opens above the high of the previous bar and closes below its low.

By definition, key reversal bars open with a price gap. As gaps within intraday time frames are rare, you will find most key reversal bars in the daily and above time-frames.

What does it mean?

A down gap is a powerful down thrust. When the market rejects such a strong bearish move with certainty, it might have reversed its sentiment to bullish.

On the other hand, when a gap upwards bumps into clear resistance, the market might have turned bearish.

Essentially, a key reversal bar is a violent display of strength that hints at a change of market sentiment.

How do we trade it?

  1. Buy above a bullish key reversal bar (If uncertain, wait for the price to close above it before buying.)
  2. Sell below a bearish key reversal bar (If unsure, wait for the price to close below it before selling.)

3. Exhaustion Bar

What does it look like?

A bullish exhaustion bar opens with a gap down. Then, it works its way up to close near its top.

A bearish exhaustion bar opens with a gap up before moving down to close as a bearish bar.

In both cases, the gap remains unfilled. Also, high volume should occur with the exhaustion bar.

What does it mean?

Its name explains it all. It represents exhaustion and a failed last-ditch attempt.

After the bears are exhausted, the bulls will take over, and the market will rise.

After the bulls are exhausted, the bears will take the market down.

How do we trade it?

  1. Buy above a bullish exhaustion bar
  2. Sell below a bearish exhaustion bar

4. Pinocchio Bar (Pin Bar)

What does it look like?

It resembles the nose of Pinocchio. It has a long and distinct tail.

For bullish pin bars, the lower tail takes up most of the bar. For bearish pin bars, it is the upper tail that dominates.

What does it mean?

Paraphrasing Martin Pring, the pin bar lies like Pinocchio.

With its long tail, a pin bar breaks a support or resistance momentarily to trick traders into entering the wrong direction. These traders are trapped, and there is often money to be made when you find trapped traders.

How do we trade it?

  1. Buy above a bullish pin bar that is rejected from support level
  2. Sell below a bearish pin bar that is rejected from a resistance level

5. Two-Bar Reversal

What does it look like?

The two-bar reversal pattern is made up of two strong bars closing in opposite directions.

The bullish variant consists of a strong bearish bar followed by a bullish bar. Reverse the order to get its bearish counterpart.

What does it mean?

Every reversal pattern works on the same premise. A clear rejection of a downward thrust is a bullish reversal, and a clear rejection of an upthrust is a bearish reversal.

In this case, the first bar represents the first thrust, and the second bar represents its rejection.

How do we trade it?

  1. For bullish reversals, buy above the highest point of the two-bar pattern.
  2. For bearish reversals, sell below the lowest point of the two-bar pattern.

6. Three-Bar Reversal

What does it look like?

In sequence, the three bars of the bullish pattern are:

  1. A bearish bar
  2. A bar has a lower high and lower low
  3. A bullish bar with a higher low and closes above the high of the second bar

Accordingly, the bearish pattern is made up of:

  1. A bullish bar
  2. A bar has a higher high and higher low
  3. A bearish bar with a lower high and closes below the low of the second bar

What does it mean?

A three-bar reversal pattern shows a turning point. Compared to the other reversal patterns, the three-bar reversal pattern is the most conservative one as it extends over three bars, using the third bar to confirm that the market has changed its direction.

How do we trade it?

  1. Buy above the last bar of the bullish pattern
  2. Sell below the last bar of the bearish pattern

7. Three-Bar Pullback

What does it look like?

This bar pattern is easy to identify.

Three consecutive bearish bars form a bullish pullback pattern, and three consecutive bullish bars form a bearish pullback pattern.

What does it mean?

When the market is trending, it is hard to sustain a counter-trend pullback. Hence, after a pullback of three bars, the trend is ready to resume.

How do we trade it?

  1. Within a bull trend, wait for three consecutive bearish bars. Then, buy above the next bullish bar.
  2. Within a bear trend, wait for three consecutive bullish bars. Then, sell below the next bearish bar.

8. Inside Bar

What does it look like?

An inside bar must stay completely within the range of the bar immediately before it. In other words, the second bar must have a lower high and a higher low.

What does it mean?

An inside bar is a contraction in price range/volatility. Within the same unit time, the market covers less ground and stays completely within the range of the previous bar.

It is a pause in price action and does not show clear strength in either direction.

How do we trade it?

  1. Place bracket orders around it to trade its breakout in either direction. (A buy stop order above its high, and a sell stop order below its low. Once one order is triggered, cancel the other.)
  2. Place only one order (buy or sell) according to the market trend.
  3. Wait for a breakout of the inside bar and trade its failure.

9. Outside Bar

What does it look like?

An outside bar pattern is the polar opposite of an inside bar.

Its range must exceed that of the previous bar with a higher high and a lower low.

What does it mean?

It is a short-term expansion in price range/volatility. It shows strength in both directions.

In most cases, it is uncertain if the bulls or the bears have won. The only certainty is the increased volatility.

How do we trade it?

  1. Wait for a break-out of the outside bar and fade it. (Especially for outside bars that look like dojis, or those that go against the trend.)
  2. Trade its break-out, especially when the outside bar closes near its top or bottom. (e.g., Popgun Pattern)

10. NR7

What does it look like?

This bar pattern requires seven bars. If the last bar has the smallest bar range within the sequence, it is an NR7 pattern.

To clarify, bar range refers to the difference between the high and the low of a bar.

What does it mean?

Like the inside bar, it indicates decreasing volatility.

As the lower volatility comes within the context of seven bars, instead of a single bar like in the case of an inside bar, the NR7 pattern is a stronger sign of decreasing volatility.

However, while the inside bar shows no strength in either direction, the NR7 pattern might drift upwards or downwards. In such cases, the NR7 represents a price thrust with decreasing volatility.

As the market alternates between range contraction and range expansion, the NR7 alerts us to standby for explosive moves.

How do we trade it?

  1. Buy break-out of the high of the last bar if the trend is up
  2. Sell break-out of the low of the last bar if the trend is down

What’s Next?

Hybrid Patterns

These ten patterns are not mutually exclusive. In fact, many combinations produce valid bar patterns.

Here are some examples:

  • ID/NR4 combines an inside bar with a variant of NR7
  • Reversal bar after a three-bar pullback
  • Two-bar reversal with an inside bar as the second bar

Beyond Bar Patterns

Bar patterns alone will not offer a trading edge.

Common strategies incorporate market bias analysis, chart patterns, and volume analysis into the mix. Bar patterns form just one facet of a price-based trading approach.

Bar patterns represent just one aspect of a price-based trading plan.

Serious Traders Only!

Day Trading With Price Action – A complete course that teaches you the art of price action trading.

Perfectly structured with step-by-step guides to help you understand the principles of price action analysis.

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